Royal Little, Pioneer in Forming Of Conglomerates, Is Dead at 92

By ERIC PACE

Published: January 14, 1989

Royal Little, the shrewd Rhode Island entrepreneur who is widely regarded as the inventor of the modern conglomerate, the highly diversified breed of corporation that became the rage on Wall Street in the late 1960's, died Thursday night at his home in Nassau in the Bahamas. He was 92 years old and also had a house in Narragansett, R.I.

Mr. Little's death was reported yesterday by Jeanie McAlpin, a vice president of Lonsdale Enterprises, a financial consulting concern based in White Plains of which Mr. Little was chairman at his death. He was also active in the affairs of the Little Family Foundation and in other philanthropies.

Mr. Little made industrial history by taking Textron Inc., which was deeply rooted in the textile industry, and grafting onto it a thicket of small companies that turned out diverse products like ball bearings, gas meters, golf carts, helicopters, metal-working machines, radar antennas, screws and snowmobiles. Program Served as Model

This program of unrelated diversification, begun in the early 1950's, brought a marked improvement in Textron's return on capital, increased its sales from $99 million in 1952 to $383 million in 1960 and served as a model for a host of corporate empire builders who became known as ''conglomerators.''

Mr. Little's skill at acquisitions so outshone those of his competitors that he became famous, as Dun's Review put it, as ''the man who started the whole conglomerate movement.''

Looking back after retiring in 1960 as Textron's chairman and chief executive, Mr. Little said simply that his program had ''worked, and that's how the so-called conglomerate trend got started in the United States.'' Solution to Low Profits

Forming a conglomerate was Mr. Little's solution to a problem that had confronted many other business executives: what to do about the discouragingly low rate of return that Textron, which he had founded in 1923, was earning on its capital.

Such wholesale acquiring of diverse companies was an innovation in a country where major industrial concerns had generally adhered to their long-established activities. At the time, the General Motors Corporation stuck mostly to making cars and trucks, for instance, and the Coca-Cola Company to soft drinks.

In diversifying so drastically, Mr. Little had as a prime goal, as he later put it, to ''eliminate the effect of business cycles on the parent company by having many divisions in unrelated fields.'' Differed From Other Innovators

As the conglomerate era progressed, Mr. Little remained essentially an entrepreneur: he took particular pleasure in making the acquisition deals and fitting the new companies into his empire. In this he differed from other conglomerate innovators, like Harold S. Geneen, the longtime head of the I.T.T. Corporation, whose strength lay in exercising central control over the operations of diversified and far-flung organizations.

Mr. Little, in his later years, liked to play down his own success by citing those of his acquisitions and attempted acquisitions that had been the most unsuccessful. He even gave his memoirs, published in 1979, the title ''How to Lose $100 Million and Other Valuable Advice.''

Mr. Little's impulsive-seeming actions were sometimes controversial. One particularly unsuccessful move was the acquisition of the Leilani, a steamship that operated at an embarrassing loss. At a 1958 stockholders meeting, one investor, criticizing the deal, shouted, ''The ship will be at the bottom of the sea before the mortgage is paid off.'' Mr. Little smiled and said, ''We hope so.'' Textron Methods Admired

But as the years passed, Mr. Little, having earned fame by his acquisitions, also attracted admiration in business circles for the solid way in which he had constructed Textron as a conglomerate, acquiring companies that themselves had capable managements.

Mr. Little lived for much of his life in Narragansett. He was born in Wakefield, Mass., on March 1, 1896. His father died at a young age, and his stepfather was an unsuccessful printing executive.

After an austere childhood, young Royal was put through Noble & Greenough, a Boston private school, by Arthur D. Little, the well-known management consultant, who was his uncle and mentor. He entered Harvard College but left during World War I and served as an infantry lieutenant in France and Germany, returning to Harvard to get his bachelor's degree in 1919. Insufficient Financing

Mr. Little founded the Special Yarns Corporation, a predecessor of Textron, in 1923 with a borrowed $10,000, and wrestled with insufficient financing for more than a decade. After World War II he expanded the company, then named Textron Inc., and took it into the manufacturing of fibers, cloth and finished garments.

By 1952, despite Mr. Little's best efforts, Textron was showing a loss of $6 million on $99 million in sales, and, as he later wrote: ''After 30 years in the textile business, I became discouraged with the rate of return we were earning on capital. We persuaded the stockholders at the annual meeting to amend the articles of association so that we could invest in completely unrelated businesses.''

From 1953 to 1960 Textron absorbed 40 concerns, ranging from the Camcar Screw and Manufacturing Corporation to the Dalmo Victor Company, makers of airborne radar antennas.

In 1960 Textron earned $14 million, or $2.93 a share, on $383 million in sales. The corporation had 29,000 employees and 90 plants and ranked 124th in size on Fortune magazine's roster of the 500 largest industrial companies. And in 1963, it sold off all its remaining textile operations. How $200,000 Was Spent

Mr. Little's annual income was $200,000, he reported in a book published in 1959, and he gave this breakdown of how it was spent: Uncle Sam, $116,000; wife's household allowance, $24,000; support of mother, $18,000; home improvements, $10,000; family charity foundation, $20,000; left for myself, $12,000; savings, 0.

A year before Mr. Little retired from Textron, he organized the Narragansett Capital Corporation, a venture capital concern. For years he was proud that he ''played his age'' in golf.

Mr. Little married Augusta Willoughby Gage Ellis in 1932. They were divorced in 1959.

He is survived by a son, Arthur D. Little of Boston, who is managing director of Narragansett Capital Inc., which is now an investment banking concern; a daughter, Augusta Bishop of Vashon Island, Wash. - both of whom were with him when he died -and by four grandchildren.

As Mr. Little wished, there will be neither a funeral nor a memorial service. ''No funeral - a barbaric institution,'' he wrote in his memoirs, adding, ''no memorial service - hope my friends will just think I've taken a long trip.''